Napster Files for Chapter 11
Jun. 03, 2002
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SAN FRANCISCO (AP) _ Napster Inc. filed for Chapter 11 bankruptcy Monday, seeking court protection from creditors under a plan by music industry heavyweight Bertelsmann AG to take over what's left of the company.
The Internet music-swapping service has agreed to sell its assets to Bertelsmann for $8 million in cash and the assumption of certain liabilities, according to papers filed in a Wilmington, Del., court.
The liabilities include any new loans to Napster and forgiveness of the $91 million Bertelsmann loaned Napster before the filing, Napster's bankruptcy lawyer Rick Cieri said.
After the bankruptcy process is complete, Napster will sell itself to Bertelsmann, unless another company submits a higher bid, Cieri said.
``The Chapter 11 process is going to be utilized to maximize the value of Napster, whether by a sale to Bertelsmann or someone else,'' Cieri said.
Calls to a Napster spokeswoman were not returned Monday.
Bertelsmann said May 17 it would buy Napster for $8 million _ slightly more than half what it had previously offered to purchase the company _ to pay Napster's creditors as part of a financial reorganization.
As of April 30, Napster had about $7.9 million in assets and about $101 million in liabilities, according to the filings.
The bankruptcy filing is the swan song for a company that three years ago set off a frenzy of online song-swapping that attracted millions of users, as well as the ire of the recording industry, which sued for copyright infringement.
At its peak, Redwood City-based Napster boasted some 60 million users and seemed at once to symbolize both the excitement of the digital revolution and the worst nightmares of the established recording industry.
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